45. To promote the development of the local bond market, we introduced the Government Bond Programme in 2009. The Programme comprises two parts, one on issuing bonds to institutional investors and the other to retail investors. As at end-December 2010, government bonds worth $24 billion were issued under the Institutional Bond Issuance Programme. For retail bonds, the current low-interest rate environment has reduced the attractiveness of conventional fixed-rate bonds to retail investors. Inflation-linked retail bonds are a preferable option for initiating the retail bond issuance. I believe that this will help enhance retail investors’ understanding of the bond market and increase their interest in bond investment.
46. The issuance of inflation-linked retail bonds, or “iBond”, will help reduce the impact of inflation on our people. A low-interest rate environment with an inflationary trend will inevitably erode the purchasing power of household savings. I will issue
$5 billion to $10 billion worth of Hong Kong-dollar iBond under the Government Bond Programme. This will provide our citizens with another investment option for coping with inflation while promoting the development of the local retail bond market.
47. Our preliminary plan is to issue iBond with a maturity of three years to Hong Kong residents. Interest will be paid to bond holders once every six months at a rate linked to the inflation of the last half-year period. The HKMA is working out the implementation details and formulating the sales arrangements, with a view to launching the bonds in six months.
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